Outlook: Stopping Murdoch won't be so easy

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EVERYONE'S GOT a view on whether Rupert Murdoch's Sky should be allowed to take over Manchester United, and outside his own newspaper and TV interests, they are mainly negative in the extreme. The task facing regulators is to disentangle this wall of hostility, which is partly emotional in nature, from the real competition and public interest issues raised by Mr Murdoch's latest assault.

Is he going to be allowed to do this, or isn't he? The answer is probably yes, for this is not a clear-cut case and it is hard to see what grounds the competition authorities would have for stopping him.

To many, Mr Murdoch is still a demon focused unrelentingly on world domination. Manchester United, on the other hand, is a much loved national treasure. For these people it's like his acquisition of The Times all over again. Yet it would plainly be bad policy to block BSkyB for this reason alone.

Love him or loathe him, Mr Murdoch occupies an important commercial position in Britain, provides thousands of jobs and has brought about a revolution both in the newspaper industry and commercial TV. He therefore deserves as fair a hearing as anyone else. Policy cannot be dictated by the mob, however much Mr Murdoch's interests are sometimes responsible for whipping it up.

At the same time, however, Mr Murdoch is also a monopolist by nature and instinct, and his motives therefore demand the closest possible scrutiny. So what does Sky hope to get out of Man United? Its motives appear a mixture of the defensive, pre-emptive and tactical. Live coverage of premier league games is Sky's most lucrative single source of revenue. That contract comes up for renegotiation in 2002, and having Man United? in the same stable could provide an important bargaining chip, if only because the League might find it difficult to cut a deal with anyone else without the support of Manchester United.

The Office of Fair Trading is meanwhile planning to bring the present arrangement between the League and Sky before the Restrictive Practices Court next year. Should that judgement go against the League, and clubs are forced to sell TV rights individually, rather than collectively as a cartel, then again Sky would be sitting pretty as owner of the club everyone wants to play. And finally Sky is always in the market for high quality pay per view content for its new digital platform. Manchester United is nothing if not that.

The first two of these motives will give the Office of Fair Trading enough cause for concern to order a Monopolies and Mergers Commission investigation, possibly as part of a wider probe into the sort of issues that will be explored by the Restrictive Practices Court next year. But of themselves, they seem too intangible and complex to block the deal altogether.

There are no clear cut competition issues in this combination, only the more difficult ones raised by vertical integration. Given that broadcasting throughout the world is highly integrated in precisely this fashion, it is not easy to see what grounds there are for preventing it here. If this had been anything other than the explosive combination of Murdoch, TV and football, it would scarcely have raised an eyebrow.

Is there any possibility of counter bidders? Man United? holds much the same attractions to Britain's fledgling alternative pay TV service, OnDigital, as it does to Sky. But it seems unlikely that either of OnDigital's shareholders, Carlton and Granada, would be prepared to make that kind of financial commitment, notwithstanding the fact that Granada is the ITV franchise holder for the Manchester area and already has commercial links with the club.

Granada once before considered buying Manchester United, but if it rejected the case then when the club was worth only a fraction of what it is now, think how much harder it would be to justify to its shareholders today. Nor would Man United? be worth as much to a financial purchaser, such as Joe Lewis's ENIC, as it would to Sky.

So at this stage, the chances of Mr Murdoch gaining his quarry seem reasonably high. What that's going to do to British football is anyone's guess, but don't expect it to buoy up shares in the rest of the sector. There are only three or four clubs in England capable of attracting a big media player like Mr Murdoch, and once he's bought one of them, it is not clear who there is left to buy the rest.


THE BOOKER cash-and-carry chain has long been a dismal story of low margins and a declining customer base compounded by management error. But it surely deserves better than this. Snubbed in merger talks by Somerfield, the voracious supermarket group, it is now cosying up to Budgens, a supermarket minnow with sales a tenth of its own.

The all share merger would effectively be a reverse takeover, with Booker taking over Budgens but being run by Budgens' chief executive John von Spreckelsen - in other words, a management buy-in. This is all fine and dandy for Mr von Spreckelsen, but as we have said here before, it all looks a rather complicated, and expensive way of going about finding a new management team.

If the deal with Somerfield was a hard one to swallow, this one is even harder. At least with Somerfield the merger had the merit of scale. The logic was that the combined buying power of pounds 11bn would be sufficient to wring out significant cost savings from suppliers. With Budgens the synergies would be far lower, say pounds 30m a year, though Budgens' trading link with Rewe, the German retail giant, might help bring down Booker's cost base.

There is also the risk of alienating Booker's core corner shop customers, who have understandable concerns that Booker would favour its Budgens subsidiary over other customers. Budgens admitted this was a worry with the Somerfield deal, but now it seems prepared to these concerns aside.

All this seems to indicate that Booker is desperate. To even contemplate a deal like this must mean not only that there is no other buyer in town, but also that the Booker board has no idea how to pull itself out of the mire.

But that does not necessarily mean that any deal is better than none. For pounds 120m (the cost of Budgens to Booker shareholders), Booker could go out and recruit the most incentivised management team in the land. Not that it should have to. Any competent executive should surely be capable of pushing through the company's stated strategy of selling off the non cash & carry businesses and improving margins.

Booker's own management may well have run out of ideas. Indeed that much now seems certain. But its board - and its highly paid advisers - should be aware that you don't have to buy the company to secure the services of a decent chief executive.

North Sea oil

IS IT COINCIDENCE that the Government has abandoned its review of North Sea oil tax just as the polls show that the Scottish Nationalists are going to trounce Labour in the election? Or that with the oil price on its knees, the bidding for the 18th round of off-shore licences draws to a close with hardly a single blue-chip applicant? Surely not.